New York Life Settlement Provider License Fees May Hurt Consumers

In 2009, New York State passed much anticipated life settlement legislation, which brought life settlement brokers, life settlement providers and life settlement intermediaries under the regulatory authority of the New York Insurance Department.

This regulatory body is in the process of administering licensing requirements for industry participants conducting business in New York state.

According to the Life Settlements Report, the New York Insurance Department is planning to impose a $20,000 licensing fee for life settlement providers. The regulatory body also plans for a $5,000 biennial life settlement provider license renewal fee. While other states require more modest fees of approximately $500, a license fee of $20,000 ultimately hurts consumers in New York.

The past year and a half has been especially difficult for life settlement providers and their funding sources. Some providers have gone out of business, Credit Suisse had a substantial downsizing of their Life Finance Group and other providers can not purchase policies because their funding sources lack capital. A dramatic 28.6% slide in the most recent Amrita Life Settlement Index results affirmed the weakening demand and market slump. At this point, providers are acutely vulnerable to increases in overhead due to the anemic transactional levels in the marketplace.

Even in better times, we’ve seen inhospitable state regulatory and statutory environments drive life settlement providers away.

For example, Florida which is a very large market for life settlements, has a reputation for being a difficult place to operate as a provider. As a result, many providers have turned in their licenses and only 14 remain according to the Florida Office of Insurance Regulation website. That number is a bit deceiving since some on the list have gone out of business or do not currently have capital to buy policies. Only a handful of providers are actually conducting business in Florida now. Consequently, policies with a Florida nexus receive significant discounts in their settlement offers due to the lack of competition. The providers that are still active in the state are buying policies with higher IRR’s than other states, which results in lower offers to Florida consumers.

Unfortunately, when the New York Insurance Department makes that state an inhospitable environment for life settlement providers, they will have no choice but to make difficult decisions regarding the merit of buying policies there. If providers do decide the new NY compliance and financial burden isn’t worth the investment of time and money, consumers in another state will lose out.